Critical Part of Keystone Report Done by Firms with Deep Oil Industry Ties

Two consulting firms provided State Department with key analysis of whether the pipeline would speed development of Canada's oil sands.

Protesters march to the White House and urge Pres. Obama to reject the Keystone XL oil pipeline last month. A U.S. State Department report released last week says the project is unlikely to have a major impact on the rate of Canada's oil sands development. Credit: Christine Irvine

The State Department's recent conclusion that the Keystone XL pipeline "is unlikely to have a substantial impact" on the rate of Canada's oil sands development was based on analysis provided by two consulting firms with ties to oil and pipeline companies that could benefit from the proposed project.

EnSys Energy has worked with ExxonMobil, BP and Koch Industries, which own oil sands production facilities and refineries in the Midwest that process heavy Canadian crude oil. Imperial Oil, one of Canada's largest oil sands producers, is a subsidiary of Exxon.

ICF International works with pipeline and oil companies but doesn't list specific clients on its website. It declined to comment on the Keystone, referring questions to the State Department.

EnSys president Martin Tallett said he couldn't talk about the proposed pipeline, but he pointed out that in addition to working for the oil industry, his company also works for the U.S. Environmental Protection Agency, the U.S. Department of Energy and the World Bank.

"We don't do advocacy," Tallett said. "Our goal is to tell it like it is, to tell the way we see it… If we were the pet of government agencies or oil companies, the other side wouldn't come to us."

The EIS covers many issues, including the proposed pipeline's impact on wildlife, water resources and economic development. But the section of the report that has drawn the most attention is the market analysis, which projects that if the Keystone isn't built, the industry will use other pipelines and railways to move the oil out of landlocked Alberta.

That conclusion disputes environmentalists' contention that the Alberta-to-Nebraska pipeline would spur additional production in the oil sands, which produce more greenhouse gas emissions than conventional crude oil (23 percent on average according to a report commissioned by the European Union, and 17 percent as reported in the EIS).

Weighing the importance of the Keystone XL, which would move up to 830,000 barrels of oil a day, has been a challenge even for the industry. Analysts agree that Canada needs more pipeline capacity to efficiently move the oil to global markets. But they say the growth of the oil sands industry also depends on the fluctuating world oil market, on the rate of growth in rail transportation and on whether other proposed projects involving new or expanded pipelines are allowed to proceed.

The study's conclusion that the Keystone XL wouldn't have much effect on oil sands development was "a judgment call based on projections of the future," said David Driesen, a law professor at Syracuse University who specializes in economics and environmental law. "Nobody knows the answer to that question…A lot of the judgment deals with which facts do you emphasize, and how you gather" the information.

TransCanada, the company behind the pipeline, has spent millions of dollars lobbying for the project, which must be approved by the Obama administration because it crosses an international border. The pipeline's southern leg, through Texas and Oklahoma, doesn't require presidential approval and is about halfway done.

"I think the question of conflict of interest is a legitimate one," Driesen said. If consulting firms are "used to working for industry clients, it's possible they would subtly orient their analysis in a certain way, and that could be reflected" in the document.

Driesen is a former attorney for the Natural Resources Defense Council, an environmental group that opposes the pipeline. He also represented then-Senator Barack Obama in Clean Air Act litigation.

Joel A. Mintz, a law professor at Florida's Nova Southeastern University, said that even if a consulting firm wants to be perfectly objective, it might be swayed by the prospect of future clients.

"The marketplace and ethics sometimes collide," said Mintz, who is a member scholar at the Center for Progressive Reform, which favors green policies. "If their livelihood comes from consulting for the oil and gas industry, I think it would be expected they'd be sympathetic to their future and past clients. They'll want to keep consulting."

Driesen said the State Department and other government agencies routinely outsource reports like the EIS because they don't have the staff or resources to handle the work in-house. Since most consulting firms work with industry, it would be difficult to find a company without industry ties.

Industry experience can also be an asset, he said, because it can give consultants a deeper understanding of the issues. "There's tension between the desire to have the appearance of conflict-free analysis and having experts who know what they're talking about."

No Response from State Department

The State Department did not respond to questions about what role agency officials played in the EIS analysis and review. According to the EIS, the agency "directed the preparation" of the report, but the cover page lists the name of just one official, the project's manager.

A section of the report titled "List of Preparers" names 58 employees from six consulting firms, including EnSys and ICF.

None of the companies have known ties to TransCanada. But Environmental Resources Management, the consulting firm that accounted for 45 of the 58 "preparers," has worked with Chevron and Shell, both of which are developing Canadian oil sands.

The remaining three consulting firms apparently don't have publicly available websites. When contacted by InsideClimate News, they refused to discuss their client list and directed questions about the EIS to the State Department.

Tallett, the EnSys president, said that although his company's clients include the American Petroleum Institute and other industry interests, EnSys has also worked against the oil industry. EnSys employees acted as expert witnesses for various state water agencies in court cases on groundwater contamination from MBTE, a gasoline additive.

"If we'd shied clear of an assignment from the Department of State because sometime in the past we've worked for a company that could benefit [from the Keystone XL]—and if we did that consistently—we would be out of a business," he said.

Less Screening for Contract Employees

The outsourced EIS is part of a decades-long trend in hiring private consultants to conduct government work. "Everywhere you look, almost everything the government does is by contractors and grantees," said Kathleen Clark, a practicing lawyer and law professor at Washington University in St. Louis who's an expert on government ethics.

One of the problems with this system, Clark pointed out, is that contractors don't necessarily follow the conflict of interest rules that apply to government workers.

"In general, the government has rather strict standards for conflict of interest for its own employees, and in general when it outsources work to contractors, it doesn't outsource those standards," she said.

For example, if a State Department official has a second job with a company that might benefit financially from the Keystone XL—or is negotiating with them for a future job—then he or she would be barred from working on the EIS. The same restrictions would apply if the employee's spouse worked for that company.

The State Department did not respond when asked if it screened the consulting firms' employees.

The latest EIS is the agency's fourth attempt to evaluate the Keystone's environmental footprint. The first two versions were criticized by the EPA for failing to adequately account for the project's greenhouse gas emissions, among other things. When the third version was released in August 2011, the agency came under fire for allowing Cardno Entrix, a consulting firm that lists TransCanada as one of its clients, to work on the report.

During a press conference on Friday, an agency official emphasized that the latest EIS is a draft document that neither supports nor opposes Keystone XL. The public will have 45 days to submit comments, after which the State Department will publish the final EIS. That document will factor into the Obama administration's decision on the pipeline, expected sometime this summer.